The Financial Supervisory Service. Yonhap News
South Korean banks’ total capital ratio under Bank for International Settlements standards rose slightly in the second quarter, extending an improvement in financial soundness. Higher net profit and a sharp expansion in common equity capital from share sales drove the gain.
The Financial Supervisory Service said on the 31st that the total capital ratio at domestic banks stood at 15.77% at the end of June, up 0.03 percentage point from 15.74% at the end of March. The BIS total capital ratio measures equity capital against risk-weighted assets and serves as a key gauge of a bank’s financial soundness.
The common equity Tier 1 ratio rose 0.12 percentage point to 13.62% over the same period, while the Tier 1 capital ratio climbed 0.08 percentage point to 14.84%. Regulatory minimums are 8.0% for common equity Tier 1, 9.5% for Tier 1 capital and 11.5% for total capital. All domestic banks comfortably exceeded those thresholds, which the regulator assessed as a sound level.
The increase in capital ratios reflected higher net profit. Combined operating results at 20 domestic banks reached 7 trillion won in the second quarter, up from 6.8 trillion won in the first quarter.
Total capital ratios were highly stable at Woori, NongHyup, Citibank Korea, Standard Chartered Korea, K Bank, Kakao Bank, Toss Bank, Suhyup and the Export-Import Bank of Korea, all above 16.0%. BNK, however, came in below 14%, a relatively low level.
For common equity Tier 1, Citibank Korea, Standard Chartered Korea, K Bank, Kakao Bank, Toss Bank, Suhyup and the Export-Import Bank of Korea posted ratios of 14% or higher, while KB, Shinhan, Hana, Woori and the Korea Development Bank stood at 13% or above. NongHyup rose 0.94 percentage point, Standard Chartered Korea 0.78 percentage point, iM 0.25 percentage point and Citibank Korea 0.16 percentage point. K Bank fell 1.39 percentage points, the Export-Import Bank of Korea 0.22 percentage point, Suhyup 0.20 percentage point and BNK 0.15 percentage point.
“Amid persistent external uncertainties including a prolonged situation in the Middle East, credit risk is widening due to changes in economic conditions such as interest rate increases, and the possibility of a decline in capital ratios remains,” an FSS official said. “We plan to encourage domestic banks to strengthen their loss-absorbing capacity and capital adequacy management so they can maintain stable soundness while faithfully carrying out their core role of financial intermediation.”